In an answer to what he would do if he were Mayor Ed Lee, Palihapitiya said he’d resign. That was the last straw for Conway, who’d been waving his hand for comment for the last 10 minutes of the session.

Conway is a close friend of Ed Lee and was a major backer of the San Francisco Mayor’s election campaign, dropping $275,000 to help pass Prop E, which lowered the business tax for tech companies in SF.

Conway finally erupted and launched into Palihapitiya, calling him out on his idea for contributing employee equity to the city and also about ridiculing Marc Benioff earlier, defending Benioff’s charitable contributions to the city.

“They’re working to make it a better city and so is Mayor Ed Lee, and it is going to get better, not worse,” yelled Conway.

Palihapitiya countered, saying there were a lot of frustrated people getting pushed out of housing in the city and added in his belief in a subsidized housing tax.

Conway lost it at that point and said Mayor Ed Lee actually had a mandate in every city department for building 30,000 housing units, a third of which would be for low-income residents in the city. “Is that not enough?,” asked Conway.

Palihapitiya divulged his idea to help the lower income residents of San Francisco while up on stage earlier, basically saying he thought San Francisco startups should have a 1% equity tax.

Conway, who is a long-time investor in many of the major Silicon Valley tech firms could barely contain himself over that and many other statements made by Palihapitiya, pointing out that he lives in Palo Alto and that Conway, himself, actually lives in San Francisco.

Conway then reiterated what Palihapitiya had said earlier about Google. “You ridiculed Google for not being generous enough. They’re paying $8 million dollars for the kids…Google’s participating in San Francisco. You don’t know what you are talking about.”

“He was so arrogant,” Conway said after, speaking of Palihapitiya. “Somebody had to say it. It was obvious.”

Update: Conway has given a statement to TechCrunch about the discussion today:

I’ll grant you that today did not reflect the approach I would normally take as a member of an audience listening to a speaker. But as a San Francisco resident who knows first-hand about the significant efforts underway in the public and private sectors to address the City’s housing crisis and widening income gap, it’s very difficult to sit quietly and listen to someone who is not engaged at all in these efforts spread so much misinformation.

Chamath was talking about the right issues – I agree that tech and those who are doing well in this new economy need to do more – we are still not doing enough to educate every child, train everyone for a job and house our workforce and families.

But rather than lecture everyone else about what’s wrong with San Francisco, i would like to see Chamath and more of his colleagues in the Valley join those of us who are trying to DO something about these challenges in SF. I’ve already reached out to him and invited him up to the City to meet with me and some others so we can talk about ways he can get involved.”

Update to the previous update: Palihapitiya gave an update to TechCrunch, following Conway’s update:

As someone who grew up in need of a social safety net and was lucky enough to use it to get to the “other side”, I’m really sad that the social mobility that I benefited from no longer exists in the same way. My parents apartment cost $500/mo. I had fully subsidized federal health care. I went to a great university that cost $10k/yr. Now that was in Canada and it is probably too naïve to expect this type of equality to exist all over the US, but I think we as a population in Silicon Valley can create an example for the rest of the US of how people can economically benefit and bring many people along.

As a city/state/country, we should be frustrated, but I think we need to focus our frustration about this towards those that have the moral imperative to fix it: our political system and our political leaders. It isn’t a company’s moral imperative to fix the lack of affordable housing, its the city’s. Focusing on intimidating an engineer at a given tech company distracts us from what is really necessary which are structured, meaningful programs to fix the growing social immobility that many face – not just in San Francisco but beyond.

What I proposed today was a simple concept: create an Equality Fund. Marry special economic zones in San Francisco with a quid pro quo of 1% of any company’s equity who wants to exist there. In these SEZ’s, the city can provide subsidized rent, tax breaks and other benefits but in return have the ability to benefit from the massive wealth creation that is happening in SF by these companies. These funds should then be explicitly allocated to solving three problems:

Affordable housing

Improved education funding, technical and otherwise, at all K-12 schools in the city

Community sponsored health solutions that can bring low cost, high impact solutions to today’s chronic problems including diabetes, obesity and heart disease

If we did these things, my expectation is that the SF Equality Fund would generate billions of gains over the next several years and we can then go and solve these meaningful problems in meaningful ways. It is is insufficient to celebrate piecemeal progress.

I understand that some people may be upset with proposals like this, and I am sorry if it (or I) impugns people who they are close to, but in order to catalyze this change, we need leadership who can act independently and without sway from monied interests which is the bane of all politics, local and otherwise.

Lastly, Ron reached out to me and asked me to meet and discuss this proposal with Ed Lee. I plan to do so and I appreciate him reaching out. If this fund is created, even though I do not live in SF, I’m happy to donate 1% of my carry from all of my SocialCapital funds and also find ways to subsidize any of my various companies’ products to be used for positive gain by the broadest class of SF residents.

View the exchange below:

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BioRonald Conway has been an active angel investor for over 15 years. He was the Founder and Managing Partner of the Angel Investors LP funds (1998-2005) whose investments included: Google, Ask Jeeves, Paypal, Good Technology, Opsware, and Brightmail.
Ron was previously with National Semiconductor Corporation in marketing positions from 1973-1979, and Altos Computer Systems as a co-founder, President …

BioChamath Palihapitiya is the Founder and Managing Partner of The Social+Capital Partnership – a venture capital fund based in Palo Alto, CA that incubates and invests in breakthrough companies in healthcare, education, financial services, mobile and enterprise software. Preceding his focus as an investor, Chamath was the longest tenured member of Facebook's senior executive team and helped drive …